Let’s assume that there are 5 Publishers with both Premium and Remnant inventory each, as shown in the figure
First Publisher is having Five lakh impressions of premium and one lakh impressions of remnant or unsold inventory
Likewise other Publishers also have their own count
To sell those unsold inventory, these publishers reached out to an ad network. Ad networks buy those inventory and sell it to it’s advertisers or media agencies on other hand.
Ad networks get the commission, Publishers earn revenue and Advertisers spend thier advertising budgets.
Ad Networks – Small Publisher / Small Advertiser
If you are a small Publisher and developed content which drives traffic to your website. Let’s assume that you are eligible for one of the popular ad networks in the ecosystem known as Adsense. You will have an adsense UI which helps to connect to advertisers.
As this is a google product, it allows advertisements only from google network. So from where these advertisers come from ?
Let’s assume that I am a small advertiser having some amount of budget and am already running ads on Advertiser’s side Ad Network, Google Ads. Like me, there are many other advertisers who might also run ads via google ads.
This google adsense makes your inventory available in Google display network where me and other advertisers have a chance to show our ads on your website.
In case you’re a Large Publisher like TIMES, having inventory available on a large scale means large in terms of quantity and those with a remnant inventory.
If you choose one ad network like Google AdSense, your inventory is access to limited advertisers who are on the google network only.
As there are many other ad networks available across the internet, by expecting that you might want to increase the value of inventory and making less complication of selling inventory, then you need to have one system where you meet multiple networks to meet different kinds of advertisers or buyers. This makes you earn more revenue.
Publishers can use their own ad server like Google Ad Manager. It is an ad management platform which is having more options and access to sell inventory efficiently. Using the Publisher ad server, Publisher can sell both premium and remnant ad inventory to multiple Ad networks and even Ad Exchanges too. We shall discuss about ad exchanges in future videos.
Advertisers also have their own ad servers and can spend some portion of their campaign budget, which is configured to buy on ad networks.
AD NETWORKS are just like a mediator between farmers who produce food and consumers who in need and purchase it. Just Imagine, If that mediator buys a lot of food items produced by farmers and gets less number of consumers. Simply, more supply and less demand. Then whatever the food produced and bought goes into waste. So, in any marketplace, the ratio of demand and supply is more important otherwise it may lead to losing their value of property or clients or customers.
We shall apply the same concept here for ad networks. Ad Networks creates a marketplace where publishers sell the inventory and advertisers who purchase those. If whatever the inventory is bought, is not sold by Advertisers, goes into waste. Because the lifespan of every impression is in milliseconds and should be sold whenever the impression is available in order to make money by the Publisher.
In order to meet the demand for the supply of impressions, the solution that ad networks established is to make relationships with other ad networks. Also, should be very careful and try as much as to match demand-supply. This helps networks to grow.
When a middle man gets more supply from farmers and he finds there is less demand from consumers. So instead of wasting those food items, he sold to another called mediator 2 for some commission. If this mediator 2 has enough demand for that supply then the problem is solved and all food items get sold. If not, he will reach out to another one and chain continues.
Likewise even here, if any ad network has less demand and more supply, then they make a deal with another ad network 2 in which their advertisers are on demand. Likewise, if an ad network doesn’t have demand he reaches out to another ad network. This chain continues until the inventory gets sold.
With multiple relationships between the ad networks to meet the demand and supply, there exists a daisy chain created in the marketplace. Single impression passes through multiple ad networks and takes a series of paths from publisher to advertiser. Then ads get served on websites.
Let’s understand, what happens during this process
Each Ad Network have maintained technical arrangements and consumes time too
In order for the ad to get served on the particular website’s ad slot, it takes longer time than usual
When passing one to another network, margins are involved between the networks and which lower down the inventory value.
For example, if inventory CPM is $1, when passing every step to reach the advertiser, it may come up to $0.5
When more networks are involved, publishers may not sure if that ad serves on ad slot are quality ones
They don’t have transparency of details of transaction involved, what kind of ads and so on
Not sure of the Quality of ads that might be serving
User have to wait a long time to see ad Which affects advertiser goal
The security problem of showing ad inventory to unknown players in the ecosystem
To solve this, Ad Exchange came into the picture. We will discuss ad exchange in the next Post